StateDeptcable1976-122256

Margaret P. Grafeld Declassified/Released US Department of State EO Systematic Review 04 MAY 2006

Message Text

LIMITED OFFICIAL USE

PAGE 01 STATE 012373

60

ORIGIN EB-07

INFO OCT-01 ISO-00 TRSE-00 10-11 SS-15 AF-06 ARA-06 EA-07

EUR-12 NEA-10 FEA-01 AGR-05 CEA-01 CIAE-00 COME-00

DODE-00 FRB-03 H-02 INR-07 INT-05 L-03 LAB-04 NSAE-00

NSC-05 PA-01 AID-05 CIEP-01 STR-04 TAR-01 USIA-06

PRS-01 SP-02 OMB-01 /133 R

DRAFTED BY EB/IED/OMA:RJRYAN:DLS
APPROVED BY EB/IFD/OMA:RJRYAN
EB/IFD/ODF:CKSTOCKER
TREASI TR Y:.TRT TSHNFI ,I ■

EB/GCP:CBLACK

021357

R 170656Z IAN 76
FM SECSTATE WASHDC
TO ALL DIPLOMATIC POSTS

LIMITED OFFICIAL USE STATE 012373

E.O. 11652: N/A

TAGS: EGEN

SUBJECT: FOLLOWUP TO SECRETARY'S INITIATIVES AT UN
SEVENTH SPECIAL SESSION

REES: A) STATE 8912, B) CURRENT EOREIGN RELATIONS, ISSUE
NUMBER 2, JANUARY 14, 1976

1 . THE MEASURES WHICH THE IMF INTERIM COMMITTEE APPROVED
OR ENDORSED AT ITS RECENT MEETING IN JAMAICA (SEE REFTELS
FOR BACKGROUND) HAVE PARTICULAR SIGNIFICANCE FOR LESS
DEVELOPED COUNTRIES. MANY OF THEM REPRESENT VERY PROMPT
FOLLOWUP TO INITIATIVES IN THE SECRETARY'S SPEECH TO THE
SEVENTH SPECIAL SESSION OF THE UNGA AND THE CIEC MINISTERI-
LIMITED OFFICIAL USE

LIMITED OFFICIAL USE

PAGE 02 STATE 012373

AL MEETING. THIS PROVIDES A GOOD OPPORTUNITY FOR US TO

Margaret P. Grafeid Deciassified/Reieased US Department of State EO Systematic Review 04 MAY 2006

Margaret P. Grafeld Declassified/Released US Department of State EO Systematic Review 04 MAY 2006

REEMPHASIZE OUR COMMITMENT TO THE PROGRAM WHICH THE
SECRETARY HAS OUTLINED AND NOTE THE CONCRETE RESULTS
ALREADY EVIDENT NOT ONLY IN THE JAMAICA AGREEMENT BUT
ALSO IN SEVERAL OTHER KEY AREAS NOTABLY GSP, IFAD AND
lEC REPLENISHMENT. JAMAICA SHOULD BE SEEN ESSENTIALLY AS
AN IMPORTANT LANDMARK IN THE CONTINUING PROCESS OE CON-
STRUCTING NEW COOPERATIVE AND PRAGMATIC NORTH-SOUTH
RELATIONSHIPS. MUCH REMAINS TO BE DONE BUT CLEARLY THE
DESIGN WHICH THE U.S. PROPOSED AT THE UN AND THE CIEC
MINISTERIAL, WHICH WAS LARGELY ADOPTED IN THE SPECIAL
SESSION'S OWN PROGRAM OP ACTION, IS SYSTEMATICALLY BECOM-
ING A REALITY. FOR OUR PART WE WILL CONTINUE TO PRESS
VIGOROUSLY IN THE CIEC DIALOGUE AND ELSEWHERE POR SUB-
STANTIAL ADDITIONAL PROGRESS IN THE COMING MONTHS. WE
HOPE THAT OTHER PARTIES TO THE DIALOGUE WILL PROCEED IN
THE SAME SPIRIT.

2. UNLESS LOCAL PACTORS DICTATE TO THE CONTRARY, POSTS
IN LDC NATIONS SHOULD DRAW ON THE PARAGRAPHS BELOW IN
AN APPROACH ALONG THESE LINES TO APPROPRIATE HOST
GOVERNMENT OFPICIALS. OTHER POSTS CAN ALSO USE THE SAME
MATERIAL TO MAKE SIMILAR POINTS IN CONVERSATIONS WITH
OPFICIAL CONTACTS.

3. THERE ARE THREE PRINCIPAL MEASURES WHICH THE INTERIM
COMMITTEE ADOPTED TO PROTECT LDCS PROM DANGER OP PINAN-
CIAL COLLAPSE AND FOSTER THEIR RENEWED GROWTH. THEY ARE
THE SPECIAL IMP TRUST PUND POR THE LEAST DEVELOPED,
LIBERALIZATION OP THE IMP COMPENSATORY PINANCING
PACILITY AND A WIDENING OP IMP CREDIT TRANCHES.

TOGETHER WITH EXISTING BILATERAL AND MULTILATERAL PACILI-
TIES FOR ASSISTING LDCS, WE BELIEVE THESE STEPS INSURE
THAT SUPPICIENT PINANCING IS AVAILABLE IN THE AGGREGATE
TO COVER THE VERY LARGE BALANCE OF PAYMENTS DEPICIT
WHICH LDCS PACE THIS YEAR. (WE RECOGNIZE, HOWEVER, THAT
THE SITUATIONS OP A NUMBER OP INDIVIDUAL COUNTRIES WILL
STILL BEAR WATCHING.) THESE MEASURES ALONE WILL MAKE
AVAILABLE AS MUCH AS $5 BILLION IN MAXIMUM POTENTIAL
ADDITIONAL ACCESS TO IMP RESOURCES POR BALANCE OP
LIMITED OPPICIAL USE

LIMITED OPPICIAL USE

PAGE 03 STATE 012373

PAYMENTS PINANCING THIS YEAR.

4. TRUST FUND. SECRETARIES SIMON AND KISSINGER FIRST
PROPOSED THE SPECIAL IMP TRUST PUND LATE IN 1974 AND
SECRETARY KISSINGER REAPPIRMED ITS IMPORTANCE AT THE
SEVENTH SPECIAL SESSION. IT WILL NOW BE IMPLEMENTED
IMMEDIATELY AS PART OP THE GOLD PORTION OF THE JAMAICA
PACKAGE. THE TRUST PUND WILL MAKE CONCESSIONAL LOANS TO

Margaret P. Grafeid Deciassified/Reieased US Department of State EO Systematic Review 04 MAY 2006

Margaret P. Grafeld Declassified/Released US Department of State EO Systematic Review 04 MAY 2006

THE POOREST COUNTRIES (UNDER ROUGHLY $350 PER CAPITA GNP).
THE PRINCIPAL SOURCE OF FINANCING FOR THE TRUST EUND WILL
BE THE PROFITS FROM THE SALES OVER A FOUR YEAR PERIOD
OF ONE SIXTH OF THE GOLD WHICH THE IME HOLDS. WE ALSO
HOPE THAT IT WILL RECEIVE CONTRIBUTIONS FROM IMF MEMBERS,
PARTICULARLY KEY OPEC STATES IN A STRONG INTERNATIONAL
RESERVE POSITION,SUCH THAT TOTAL FUNDING AVAILABLE COULD
REACH $1 BILLION A YEAR.

5. COMPENSATORY FINANCING. AT THE SEVENTH SPECIAL
SESSION THE SECRETARY PROPOSED THE CREATION OF A DEVELOP-
MENT SECURITY FACILITY IN THE IMF TO PROTECT LESS

DEVELOPED NATIONS FROM WIDE SWINGS IN EXPORT EARNINGS.

THE DEVELOPMENT SECURITY FACILITY HAS TWO ASPECTS. THE
FIRST AND BY FAR MOST IMPORTANT IS A SUBSTANTIAL LIBERAL-
IZATION OF THE EXISTING IME COMPENSATORY FINANCING
FACILITY. THE EXECUTIVE DIRECTORS OF THE IMF APPROVED
THIS LATE IN DECEMBER AND THE INTERIM COMMITTEE ENDORSED
THEIR DECISION AT JAMAICA. THE CHANGES IN THE FACILITY
WILL PRINCIPALLY DO THREE THINGS: A) ADAPT THE FORMULA BY

WHICH EXPORT SHORTFALLS ARE CALCULATED TO MAKE IT ACCORD
MORE WITH PRESENT ECONOMIC CONDITIONS; B) DOUBLE THE
AMOUNT A COUNTRY CAN DRAW FROM THE FACILITY IN A GIVEN
YEAR FROM 25 PERCENT OF ITS QUOTA TO 50 PERCENT; C)

INCREASE THE LIMIT ON CUMULATIVE OUTSTANDING DRAWINGS
FROM 50 TO 75 PERCENT OF QUOTA. WITH THESE MODIFICA-
TIONS, WHICH WILL GO INTO EFFECT VERY QUICKLY, LOANS
FROM THE COMPENSATORY FINANCING FACILITY COULD EASILY
REACH $1 BILLION THIS YEAR. OTHER ASPECTS OF OUR
DEVELOPMENT SECURITY PROPOSAL ARE STILL ON THE TABLE,
PARTICULARLY THE USE OF THE TRUST FUND TO PROVIDE ADDI-
LIMITED OFFICIAL USE

LIMITED OFFICIAL USE

PAGE 04 STATE 012373

TIONAL COMPENSATORY FINANCING.

6. CREDIT TRANCHE WIDENING. THE IMF NOW PROVIDES MEMBERS
IN BALANCE OF PAYMENTS NEED WITH ACCESS TO THE FUND'S
REGULAR RESOURCES UP TO 100 PERCENT OF THEIR IMF QUOTA.
USUALLY THE FUND MAKES THESE LOANS IN FOUR PHASES OR
TRANCHES. BORROWING COUNTRIES AGREE WITH THE FUND ON A
SENSIBLE PROGRAM TO REDRESS THEIR BALANCE OF PAYMENTS
DIFFICULTIES AND THE CONDITIONS ON THE LOANS GET STIFFER
AS MORE IS BORROWED. THE AGREEMENT REACHED AT JAMAICA
WILL PROMPTLY EXPAND MAXIMUM LENDING IN EACH OF THE
CREDIT TRANCHES BY 45 PERCENT (MAKING MAXIMUM ACCESS TO
CREDIT TRANCHES 145 PERCENT OF QUOTA) BUT WILL NOT
CHANGE THE CONDITIONALITY OF THE LOANS. THIS ARRANGEMENT,
WHICH WILL BE TERMINATED WHEN THE IMF QUOTA INCREASE

Margaret P. Grafeid Deciassified/Reieased US Department of State EO Systematic Review 04 MAY 2006

Margaret P. Grafeld Declassified/Released US Department of State EO Systematic Review 04 MAY 2006

ALSO AGREED AT JAMAICA GOES INTO EFFECT (18 MONTHS - 2
YEARS EROM NOW), WILL POTENTIALLY BENEEIT ALL IME MEMBERS.
IT SHOULD BE PARTICULARLY IMPORTANT, HOWEVER, TO LESS
DEVELOPED NATIONS NOW RELYING ON PRIVATE CAPITAL
MARKETS EOR SUBSTANTIAL FINANCING. SOME COUNTRIES IN
THIS CATEGORY FACE THE POSSIBILITY OF SEEING THEIR ACCESS
TO PRIVATE CAPITAL DIMINISHED THIS YEAR. HEIGHTENED
ACCESS TO IMF CREDIT WILL IMPROVE THEIR CREDITWORTHINESS
WITH BANKS AND PROVIDE A CUSHION IF ACCESS TO PRIVATE
LENDING IS STILL REDUCED. IN HIS SPEECH AT THE CIEC
MINISTERIAL, THE SECRETARY EXPRESSED PARTICULAR CONCERN
ABOUT THIS GROUP OF COUNTRIES IN THE CONTEXT OE THE LARGE
BALANCE OF PAYMENTS DEFICITS LDCS FACE THIS YEAR. HE ALSO

HELD CREDIT TRANCHE WIDENING AS A PARTICULARLY PROMISING
APPROACH TO DEALING WITH THE PROBLEM.

7. AT THE UN IN SEPTEMBER, THE SECRETARY COMMITTED THE
U.S. TO IMPLEMENT ITS SYSTEM OF GENERALIZED PREFERENCES
FOR LDCS BY JANUARY 1, 1976 AND STRESSED THE IMPORTANCE
OF IFC REPLENISHMENT AND ESTABLISHMENT OE AN INTERNATION-
AL FUND FOR AGRICULTURAL DEVELOPMENT (IFAD). IMPLEMENT-
ING ACTION ON THE PART OF THE U.S. HAS BEEN VIGOROUS IN
ALL THREE AREAS.

- ON JANUARY 1, THE U.S. PUT INTO EEFECT A GSP SYSTEM
LIMITED OFFICIAL USE

LIMITED OFFICIAL USE

PAGE 05 STATE 012373

ENCOMPASSING 2724 TARIFF ITEMS. TOTAL IMPORTS UNDER
THESE PARTS OF THE TARIFF TOTALED $24 BILLION IN 1974, OF
WHICH LDCS ACCOUNTED EOR ONLY $6 BILLION. EXISTENCE OE
THE U.S. GSP SHOULD THUS PROVIDE SIGNIEICANT SCOPE FOR
EXPANSION OF LDC EXPORTS, PARTICULARLY INTO NEW PRODUCT
LINES.

- THE U.S. HAS PARTICIPATED VERY ACTIVELY IN THE THREE
SESSIONS OF THE AD HOC WORKING GROUP ON IPAD. CONGRESS
HAS ALSO AUTHORIZED A U.S. CONTRIBUTION TO IPAD OP $200
MILLION PROVIDED THAT THE FUND HAS TOTAL CONTRIBUTIONS
OF $1 BILLION. WE HOPE THAT PINAL AGREEMENT ON THIS
NEW FUND CAN BE REACHED EARLY THIS YEAR. THE PRINCIPAL
FACTOR NOW HOLDING IT UP IS LACK OF FIRM COMMITMENTS
FROM KEY OPEC NATIONS NEEDED TO REACH THE $1 BILLION
LEVEL.

- WE HAVE ALSO TAKEN THE LEAD IN URGING THAT THE
RESOURCES OF THE INTERNATIONAL PINANCE CORPORATION BE
REPLENISHED SO THAT IT CAN PLAY A MORE ACTIVE ROLE IN
MOBILIZING PRIVATE RESOURCES FOR THE DEVELOPMENT PROCESS.
IN LARGE PART BECAUSE OP OUR INITIATIVE, THE MANAGEMENT

Margaret P. Grafeid Deciassified/Reieased US Department of State EO Systematic Review 04 MAY 2006

Margaret P. Grafeld Declassified/Released US Department of State EO Systematic Review 04 MAY 2006

OF IFC IS CONSIDERING PROPOSING A REPLENISHMENT IN EXCESS
OE $400 MILLION WITH A U.S. SHARE OE OVER $100 MILLION.

THE lEC SHOULD BRING ITS PROPOSALS EORWARD TO MEMBERS IN
THE NEAR EUTURE. KISSINGER

LIMITED OEEICIAL USE

NNN

Margaret P. Grafeid Deciassified/Reieased US Department of State EO Systematic Review 04 MAY 2006

Margaret P. Grafeld Declassified/Released US Department of State EO Systematic Review 04 MAY 2006

Message Attributes

Automatic Decaptioning: X

Capture Date: 01 JAN 1994

Channei indicators: n/a

Current Classification: UNCLASSIFIED

Concepts: POLICIES, ECONOMIC COOPERATION

Control Number: n/a

Copy: SINGLE

Draft Date: 17 JAN 1976

Decaption Date: 01 JAN 1960

Decaption Note:

Disposition Action: RELEASED
Disposition Approved on Date:

Disposition Authority: GolinoFR
Disposition Case Number: n/a
Disposition Comment: 25 YEAR REVIEW
Disposition Date: 28 MAY 2004
Disposition Event:

Disposition History: n/a
Disposition Reason:

Disposition Remarks:

Document Number: 1976STATE012373

Document Source: CORE

Document Unique ID: 00

Drafter: RJRYAN:DLS

Enclosure: n/a

Executive Order: N/A

Errors: N/A

Film Number: D76001 9-0294
From: STATE
Handling Restrictions: n/a
Image Path:

ISecure: 1

Legacy Key: Iink1976/newtext/t1 97601 46/aaaaboxx.tel

Line Count: 227

Locator: TEXT ON-LINE, ON MICROFILM
Office: ORIGIN EB

Original Classification: LIMITED OFFICIAL USE
Original Handling Restrictions: n/a
Original Previous Classification: n/a
Original Previous Handling Restrictions: n/a
Page Count: 5

Previous Channel Indicators: n/a

Previous Classification: LIMITED OFFICIAL USE

Previous Handling Restrictions: n/a

Reference: 76 STATE 8912

Review Action: RELEASED, APPROVED

Review Authority: GolinoFR

Review Comment: n/a

Review Content Flags:

Review Date: 28 JUL 2004
Review Event:

Review Exemptions: n/a

Review History: RELEASED <28 JUL 2004 by coburnhb; APPROVED <24 AUG 2004 by GolinoFR>

Review Markings:

Margaret P. Grafeld
Declassified/Released
US Department of State
EO Systematic Review
04 MAY 2006

Review Media Identifier:

Review Referrals: n/a
Review Release Date: n/a
Review Release Event: n/a
Review Transfer Date:

Review Withdrawn Fields: n/a
Secure: OPEN
Status: NATIVE

Subject: FOLLOWUP TO SECRETARY'S INITIATIVES AT UN SEVENTH SPECIAL SESSION
TAGS: EGEN, US, XX
To: ALL POSTS
Type: TE

Markings: Margaret P. Grafeld Declassified/Released US Department of State EO Systematic Review 04 MAY 2006

Margaret P. Grafeld Declassified/Released US Department of State EO Systematic Review 04 MAY 2006